“Cramming” is the term for the illegal act of placing unauthorized, third-party charges on consumers’ mobile phone bills.
The U.S. Consumer Financial Protection Bureau Tuesday filed proposed consent orders in federal court against Sprint and Verizon, requesting that $120 million worth of allegedly crammed charges be returned to wireless customers.
The CFPB acted in coordination with state attorneys general and the Federal Communications Commission (FCC). Under the proposed terms, the CFPB will oversee $120 million in consumer refunds. The companies will also pay $38 million in federal and state fines.
“Sprint and Verizon had flawed billing systems that allowed merchants to add unauthorized charges to wireless customer bills,” said CFPB Director Richard Cordray. “Consumers bore the brunt of those charges and ended up paying millions of dollars while the companies reaped profits. Today’s actions will put $120 million back into the pockets of harmed consumers and require these companies to improve their billing practices going forward.”
Authorities allege that, from about 2004 through 2013, nearly all third-party billing involved products called “premium text messages” or “premium short messaging services” because they were frequently delivered by text messages. Sprint and Verizon outsourced payment processing for these digital purchases to vendors, but failed to properly monitor them, the CFPB said.
The charges ranged from one-time fees of about $0.99 to $4.99. But they also included monthly subscriptions that cost $9.99 a month. The Wireless companies received a 30-40 percent cut of the gross revenue from these charges.
Vendors had ‘Unfettered Access’ to Consumer Accounts
“The lack of oversight by Sprint and Verizon allowed the vendors to have nearly unfettered access to consumers’ wireless accounts,” the CFPB states.
Neither Sprint nor Verizon required customers to opt in to third-party billing. Instead, they automatically enrolled customers without their consent. This policy helped perpetuate the wrongdoing since many customers did not spot the unauthorized charges, and most were unaware that third parties could place charges on their bills.
The proposed consent orders would require Verizon to pay $70 million and Sprint to pay $50 million in consumer refunds. The CFPB will oversee the redress programs. Verizon customers can submit claims for refunds at www.CFPBSettlementVerizon.com or can learn more information about the Verizon settlement by calling 888-726-7063. Sprint customers can submit claims for refunds at www.SprintRefundPSMS.com or can learn more information about the Sprint settlement by calling 877-389-8787.
Here are the consent orders for: Verizon and Sprint.